Insights Vol. 1 No. 9: F.A.T.C.A. 24/7
/TREASURY ACCEPTS CANADIAN NARROWING OF INVESTMENT ENTITY DEFINITION
Canada’s recently published guidance with respect to F.A.T.C.A. provides that only “listed financial institutions” should be considered investment entities subject to F.A.T.C.A. under the intergovernmental agreement (“I.G.A.”) with Canada (“U.S.-Canada I.G.A.”). The U.S. Treasury has accepted this position.
The U.S.-Canada I.G.A. provides that the definition of “investment entity” is to be interpreted in a manner consistent with the definition of “financial institution” in the recommendations of the Financial Action Task Force (“F.A.T.F.”). The F.A.T.F. provides that any natural person or legal entity that conducts, as a business, one or more listed activities or operations for, or on behalf of, a customer, would be treated as a “financial institution.” The F.A.T.F. also provides a list of designated nonfinancial businesses and professions, including certain trust and company service providers that are not otherwise financial institutions and act as trustees for trust entities. Canada’s anti-money laundering rules interpret this standard to treat the unlisted financial institutions as designated nonfinancial businesses. The Canadian F.A.T.C.A. guidance treats only the expressly listed financial institutions as investment entities, and as mentioned above, the I.R.S. has approved this position.
